9911796707
TMI Blog2014 (7) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.47 crore was filed. During the course of assessment proceedings, it was observed by the AO that the assessee accounted for income of Rs. 2.83 crore on account of research and development activities in its Profit and loss account against the actual receipt of Rs. 2.99 crore towards sale of services. The remaining amount of Rs. 16,19,062/- representing trial run receipts was reduced from total sales and credited to work-in-progress capitalized in the balance sheet. On being called upon to explain as to why such amount of Rs. 16.19 lakh was not offered for taxation, the assessee stated that the projects in respect of such trial run receipts were incomplete. The Assessing Officer treated such receipts during trial run period as a regular activity and included the amount in total sales. The action of the A.O was echoed in the first appeal. The tribunal was pleased to uphold the view taken by the authorities below by observing that since the receipts were after the business had been set up, the same was rightly chargeable to tax. The tribunal also accepted the assessee's alternative contention that if such amount was to be considered as income, then the corresponding enhancement s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the answer to this question has to be in negative. The Act has kept assessment proceedings distinct from the penalty proceedings and not made the penalty automatic and consequential on the making of addition. The logic is that if the assessee succeeds in proving in penalty proceedings that there was a bona fide belief for the claim of non-taxability of the receipt or the deductibility of any expenditure, then notwithstanding the fact that the finality to the taxability of such a receipt in the quantum proceedings is assigned or the deduction has been finally denied, the penalty can still be deleted if the facts and circumstances of the case so warrant. 3.4. It is relevant to note the prescription of Explanation 1 to section 271(1) as under :- Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals)or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue in the past and further by appropriately disclosing complete details in the annual accounts accompanying the return of income itself. Thus, it is evident that even clause (B) of Explanation 1 to section 271(1) is also not attracted in the facts of the present case. 3.7. The case of the assessee is not covered even within the main provision of section 271(1)(c) of the Act which is attracted only if the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. Obviously, there is no concealment of the particulars of the income inasmuch as the assessee made complete disclosure in this regard on the face of its balance sheet accompanying the return of income. Further, it cannot be a case of furnishing inaccurate particulars of income because the assessee entertained a bona fide view that the amount of trial run receipts is not chargeable to tax in the year of receipt on the strength of similar practice followed and not disturbed in the past. The sheer fact that in the final assessment, such bona fide view taken by the assessee was jettisoned by the Revenue cannot mean that the assessee either concealed the particulars of his inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given as advance to Mr. Parveen Kumar Singh in the ordinary course of business, which fact turned out to be incorrect even before the AO because the assessee admitted that it had no relation with sales. Further no material worth the name has been placed on record to demonstrate as to how the said advance claimed to be given in the ordinary course of business was deductible. Besides, there is no evidence to indicate that the amount became irrecoverable and was hence eligible for deduction. These facts point out that the assessee knowingly claimed a wrong deduction for this sum to which it was not lawfully entitled to. This deduction in our considered opinion was rightly denied and the disallowance of such amount is fully covered within the mischief of sec. 271(1)(c) of the Act. Ergo, the view of the ld. CIT(A) in sustaining the penalty on this issue is upheld. 5.1. To bolster his contention in support of the deletion of penalty, the ld. AR raised a legal argument on the strength of Explanation 4(a) to sec. 271(1) of the Act. He submitted that the assessee was approved as a company u/s 80-IB(8A) of the Act by the Government of India, Ministry of Science and Technology vide their l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as assessed is a loss, then the 'amount of tax sought to be evaded' would be the amount of tax chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished by presuming such addition to be the total income of the assessee. The essence of the crucial and decisive words used in this provision for the purposes of computing the amount of tax sought to be evaded is that the amount of addition/disallowance on account of concealment or furnishing of inaccurate particulars of income is deemed as the total income. Once such addition is to be construed as the total income for the purpose, the natural corollary which follows is that the tax is to be computed by treating such addition as the 'total income' of the assessee. At this stage, it is relevant to note the definition of 'total income' given in section 2(45) of the Act to mean : 'the total amount of income referred to in section 5, computed in the manner laid down in this Act.' Further, section 80B(5) defines 'gross total income' to mean : 'the total income computed in accordance with the provisions of this Act, before making any d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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